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A few things you always wanted to know about multipliers,but were afraid to ask

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  • Ferran Sancho

Abstract

Policy evaluation relies on validated modelling tools. Among these, the interindustry model is one of the most widely used, primarily due to its mathematical simplicity, which facilitates the calculation of economy- wide multiplier effects resulting from policy-induced changes in final demand. However, this simplicity can lead to conceptual narrowness, potentially overlooking broader contextual factors. As Oosterhaven (2017, 2022) highlights, the issue of multipliers has two key dimensions: the numerical calculations themselves and, more importantly, the modelling assumptions underlying these calculations, as they ultimately determine the relevance and validity of policy-related results. In this text, we explore this issue by comparing the various outcomes that arise under different scenarios regulating the economy's adjustment to policy-induced changes. Our findings suggest that classical multipliers may provide a biased perspective on an economy's structural behaviour.

Suggested Citation

  • Ferran Sancho, 2025. "A few things you always wanted to know about multipliers,but were afraid to ask," UFAE and IAE Working Papers 978.25, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:978.25
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    1. Antonio Manresa & Ferran Sancho, 2020. "A follow-up note on the plausibility of the Leontief and Ghosh closed models," Economic Systems Research, Taylor & Francis Journals, vol. 32(1), pages 166-172, January.
    2. Pyatt, F Graham & Round, Jeffery I, 1979. "Accounting and Fixed Price Multipliers in a Social Accounting Matrix Framework," Economic Journal, Royal Economic Society, vol. 89(356), pages 850-873, December.
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